'Ok back to where we were before Junior Zero showed up and lit my fuse. It's obviously a grid trader but what is it?'
It's called a split grid, it takes advantage of the normalcy that exist only in the forex market. Stocks can rise forever because the fed can devalue the dollar. But in the currency market all currencies are devalued more or less in sink with each other so as you look at any currency chart, you can see how they dance around the center between the two historical limits. By using a grid, we can know exactly how much we need in the balance to cover that currency pair. We switch from buy to sell in the center between the historical limits. Buy on the bottom and sell when the price is above center.
We know that a change of one pip at .01 standard lots will change the equity by .10 of what ever the first listed currency was. If we use a grid size of 100 pips then our .01 trade will make or add to the draw, (100 X .10) = $10 per range. Now all we have to do is add the total draw of X number of ranges.
If we open one buy trade for .01 lots at at center and the price drops 100 pips, our draw down will be $10. It isn't a loss until it is closed but we don't have to close it just yet. Let's suppose our currency has 4,000 pips from the lowest low, (historical low), to the highest that the price has reached since the forex market changed in 2001. 4000 / 2 is 2000 pips from center to the historical limit. 2000 pips / 100 pips per rang gives us 20 ranges up and 20 down. Each range will add a draw of $10.
When the price drops 100 pips we will have a draw of $10, at 200 pips we would have a draw of $20 from the first trade and another $10 for the second for a total draw of $30. A draw-down at the historical limit would be $2100. Use the grid addition formula (X times (X+1)) / 2 for our example x equals 20 ranges. 20 X 21 / 2 times the draw from one range of $10 equals = $2100 This amount will protect both the upper grid and the lower because there will only be one direction going at any given time.
Therefore if we limit our trade size to .01 lots and have $2500 in the balance to cover the draw, it is impossible to take a loss, no matter where the price is within the normal range between the historical limits. Don't forget to add in enough to cover the marginal reserve which at 200:1 is $5 per each .01 lots. We will have 20 so we need an extra $1000 for the margin, or at least $3500 in the balance. (We recommend at least $5000 to cover other stuff that is being glossed over here to save time and space).
Now the only thing left, is what to do when the price breaks the historical limits (there are 3 favored responses. Hedging, keeping extra money in the account for insurance and closing the trades at the historical limit and reopening one trade for the total closed (example is .20 lots when the price begins its climb back too center.
The system worked beautifully back in 2008 when all the markets were crashing we made 300% that year with zero losses. The program automatically adjusts for swap. It does not automatically adjust for interfering governments. If we are winning, the banks are paying us. We just got a little too good for the US. Politicians all on the take. Banks in charge of the economy. The usual gripes and complaints.
Thanks for taking an interest in our work. If you would like to read more about our other research projects, there is a lot more in the book Robotic Investing. I think the only place to get it at the moment is at thesafeinvestor.com It will eventually be back on Barns and Nobel and Amazon but we need a little more time for that.
These new mathematical systems, built for use by computers, (humans can't use these systems) are collectively called systemic trading systems. They are not technical nor fundamental and are only for use by computers.
Hope this helps,
PS, there is more info on our research page, forex-assistant.com There is nothing to buy there, it is just for informational use.
where research touches lives.